U.S. Senators Jeff Merkley and Amy Klobuchar Thursday introduced a new bill that would ban federal elected officials from trading on prediction markets.
The “End Prediction Market Corruption Act” — announced by press release — would ban the president, vice president and members of congress from trading event contracts, and ban non-elected “senior executive branch officials” from trading on contracts related to their work. The bill is cosponsored by U.S. Senators Chris Van Hollen, Adam Schiff, and Kirsten Gillibrand.
Under the bill, officials who trade on prediction markets could be fined $10,000 for doing so. The attorney general would have the power to bring cases against those who violate the bill in federal court.
“When public officials use non-public information to win a bet, you have the perfect recipe to undermine the public’s belief that government officials are working for the public good, not for their own personal profits,” Merkley said in the press release. “Perfectly timed bets on prediction markets have the unmistakable stench of corruption. To protect the public interest, Congress must step up and pass my End Prediction Market Corruption Act to crack down on this bad bet for democracy.”
Klobuchar noted recent reports of possible insider trading on prediction markets. In January, a Polymarket user made trades worth hundreds of thousands dollars on then Venezuelan President Nicolas Maduro being removed from power less than 24 hours before he was captured by U.S. forces. Last week, a Polymarket user named ‘Magamyman’ made $553,000 on the death of Iran’s Ayatollah Khamenei just before he was killed by U.S.-Israeli strikes. The identities of the users are not known.
“At the same time that prediction markets have seen huge growth, we have seen increasing reports of misconduct,” Klobuchar said in the press release. “This legislation strengthens the Commodity Futures Trading Commission’s ability to go after bad actors and provides rules of the road to prevent those with confidential government or policy information from exploiting their access for financial gain.”
Bill specifics
A “senior executive branch official” is defined as any non-elected government official who meets the criteria to be required to file a report disclosing their income, assets, liabilities, financial transactions, and other potential conflicts of interest.
That would include civil servants paid at or above the top level of the federal government pay scale, members of the military at brigadier general or rear admiral and above, senior officials at the Postal Service and Office of Government Ethics, administrative law judges, and White House staff commissioned by the president.
While elected officials are banned from buying and selling any event contracts, senior executive branch officials are just banned from trades on subjects in which the official in question ”participates personally and substantially as a Government officer or employee.” The bill says that this participation could include ”decision, approval, disapproval, recommendation, the rendering of advice, investigation, or otherwise, in a judicial or other proceeding, application, request for a ruling or other determination, contract, claim, controversy, charge, accusation, arrest, or other particular matters.”
Under the bill, all elected employees and senior executive branch officials must include in their annual disclosure report, “a statement of whether, during the period covered by the report, the covered reporting individual, or the spouse or dependent child of the covered reporting individual, purchased, sold, or otherwise exchanged an event contract.”
If they did, the report must also include a description of the contract in question, and its value.
House bill introduced in January
In the House, Rep. Ritchie Torres introduced a bill that would limit federal government officials’ ability to trade on prediction markets. The House bill is narrower in scope, as it would only ban trading by government officials if that official possesses or “may reasonably obtain … in the course of performing official duties” material nonpublic information, whereas the new Senate bill would completely ban officials in elected offices from trading event contracts.
The Senate bill is also more specific about enforcement than the House version. The House bill did not set out penalties or ways in which they could be enforced.
That bill was referred to the Committee on Oversight and Government Reform, as well as the Committee on House Administration, eight weeks ago, but has not had any movement in those committees.
The Senate bill has not yet been assigned to committee.
